Credit risk in Romania

According to the Romanian National Bank, in late June, more than 4.5 million Romanians, that is almost 50% of the country’s active population, had at least one bank loan.

The 500,000 people who have at least 3 loans make up the riskiest category regarding reimbursement. Back in late July, their debts stood at 3.4 billion euros.

The same report shows that that the proportion of bad credits, with repayment delays longer than 90 days, climbed from 2.8% to 10.2%, that is 3 times more than in 2008. Repayment delays of longer than 30 days have increased threefold over the last 2 years and continued to rise during the first semester of 2010, reaching almost 6%.

There is good news, however – the largest number of bad credits have a low value, about 1,200 euros and originate from consumer credits or basic needs credits, granted on the basis of identity cards, between 2004 and 2007. In turn, the number of repayment delays among people who have taken out a mortgage loan is a mere 3%.

Experts say that the situation will worsen in the coming months due to government measures: the increase of VAT from 19 to 24% and a 25% reduction in state salaries. Loans granted to state employees make up about 20% of the total credits, and such employees have now to return about 4.8 billion euros.

The National Bank report predicts Romanian banks will not see a profit in 2010, and in the best possible case will avoid making losses. 2011 is not expected to look much better. Banks already registered losses during the first half of the year, mainly due to increased banking reserves.

A survey carried out by the Romanian National Bank with local banks, shows that the total value of reserves (funds retained by banks to cover the risk of credit defaults) will increase by at least 38%. However, the solvency of Romanian banks will remain high, at around 13%, that is 3% higher than the level recommended by the central bank.

(Radio România Internaţional, Serviciul în limba engleză).